Expert Warns XLM Price Could Crash If It Flips Key Support

The XLM price could suffer a strong bearish reversal if it drops below an important support level, according to one analyst. Such a move would erase some of the gains made in the last 30 days when it jumped by almost 500%.

XLM Price Could Correct: Analyst

Stellar lumens has been a strong performer this year as it jumped to a high of $0.6345, its highest level since May 2021. At its highest point, it was up by over 743% from its lowest level this year.

Most analysts are bullish about Stellar price, helped by its strong fundamentals and technicals. In an X post, Rose Premium , predicted that Stellar would jump to $0.98, a few points below the psychological point at $1. If this happens, it means that the XLM price has a 90% upside from the current level.

However, the analyst warned that XLM price would have more downside if it dropped below $0.40. If that happens, he sees the coin plunging to $0.3235, down by 35% from the current level. 

Stellar Price Analysis: Mean Reversion Is a Key Risk

The weekly chart shows that the XLM coin price went parabolic as it jumped for four consecutive weeks. There are signs that it is forming a bullish pennant chart pattern, a popular continuation sign. This pattern is made up of a long vertical line and a symmetrical triangle and often achieves a bullish breakout. 

More upside will be confirmed if Stellar price jumps above the upper side of the pennant at $0.6355. If this happens, as we predicted this week, will increase the odds of the coin rising above its all-time high of $0.7960, followed by the psychological point at $1. 

The risk, however, is that the coin has formed a hanging man candlestick pattern. It is characterized by a long lower shadow and a small body and it usually forms at the upper side of a trend. In most periods, this hanging man leads to a downward breakdown, especially when the price moves below its lower side. 

The other risk for Stellar price is that it could go through a mean reversion. This is a situation where an asset falls back to its average prices. In this case, it remains significantly higher than the 50-week moving average at $0.1567 and the 200-average of $01.448. Such a drop would imply a near 70% retreat from the current level.